Choosing a Platform
You’ve decided to start investing and want to utilise a Stocks and Shares ISA. First of all, congratulations you’re ahead of most people! The next big hurdle you’ll face is choosing between all the different investment platforms.
Where should you open an account? It can seem like a daunting question with so many options out there but there are a few key features you should compare. You can then decide what’s important to you and make an informed choice.
If you’re already invested I hope this will help you evaluate whether a transfer to a new provider is your next course of action. Without further ado lets dive in.
Recommended Reading: Not sure what an ISA is? Check out my guide to ISAs.
Investment Options
Deciding on what you want to invest in will whittle down the list of providers substantially. One of the first places people may see a Stocks and Shares ISA being provided is their high street bank.
These tend to have a poor range of investment options usually consisting of funds and no individual stocks. A more specialised investing platform is usually a better choice even for beginners as it allows for better investment options.
For instance you may want to start investing in ETFs but as you learn more you may want to divert some of your funds into single stocks or even other asset classes. Choosing a platform that allows you to grow with it can reduce headaches down the line.
This used to be quite a big deal breaker but since the 24/25 tax year the ISA system is more flexible allowing you to invest into multiple accounts across different platforms in the same tax year. This is great for us investors as we’re not locked in to a single provider.
If you want to having one investment platform for passive investing and one for picking individual stocks, you can do that. Likewise, if you want to try a new provider you can dabble with their service for a couple months before making a decision to transfer.
Usually with these things simplicity is key but having the freedom to trial different platforms is a huge bonus.
What service does the platform provide?
When trying out a platform one of the deal breakers will be the services they provide.
Firstly how do you view, buy and sell your investments. Is this solely through an app, using a browser or can you do both. Is the service intuitive, easy to use or is it a bit clunky.
All things relating to the user experience are down to personal preference but experimenting and seeing what works for you is important.
If your goal is passive investing the extra barrier of having to login to a webpage can result in less time consumed checking your investments. Seeing less of the daily volatility of your investments could result in less stress. This may be the difference between staying the course or selling at the wrong time.
Personally, I like a service which gives me both options. This shows me they’re committed to the changing face of the industry, open to innovative new technology and committed to me the customer. At the end of the day I can always choose not to install the app.
Recommended Reading: The best way to set effective Financial Goals.
Customer Service
Customer service is the other important thing to consider. Its always nice to have great customer service to fall back on, however this really depends how independent you are and how much time you expect you’ll be contacting them.
If like me its only when something goes wrong then its likely not too big a factor. Either way its worth having a look on a review website such as Trustpilot to get a general view on recent trends in customer experience.
Just remember its usually people with complaints who feel the need to write reviews and there is always someone with something negative to say.
Security
Speaking of things going wrong, one of the key things to look out for in an investment platform is the security they provide. The two things to identify are that they are regulated and comply with the FSCS and the FCA.
In short if there was a case of the provider going insolvent or closing down then you have two level of protection.
Firstly, by law your investments have to be held in a separate account to the platforms finances. This means they cannot use your money to pay off any debt in a case of insolvency and your funds would be transferred to another broker.
In the worst case scenario the FSCS will be able to compensate you up to £85,000. It does get complicated but if they are not regulated through these two schemes its not worth the risk investing with that platform.
The UK financial sector is heavily regulated so all the major platforms abide by these regulations but its worth checking so that you can avoid any potential scams.
Platform Fees
Finally the elephant in the room, fees. There are many newer low fee platforms out there which are hugely beneficial to the private investor as it helps maintain a sense of competition between brokers.
When talking about fees we are excluding fund fees as these will be similar wherever you invest. What we are discussing are the annual platform fee, any transaction fees and any transfer fees or other miscellaneous admin fees that may apply.
Small changes in fees can make a huge difference on your end product especially after investing for your whole working life. Not only is it the actual figure they take in fees you’re missing out on but also the money you would of gained from it compounding. Fees are one of the only aspects of investing performance you can control so ensure you are getting the best value for your money.
Fees are one of the only aspects of investing performance you can control so ensure you are getting the best value for your money.
Obviously the lower the fees the better however this can be a balancing act depending on the other points above such as their customer service. The fees may also be capped or applied differently depending on how much you invest and how often.
Recommended Reading: Understand the power of Compounding, it could just change your life.
Example
One of the craziest examples is actually with the well known investment platform Vanguard.
Currently they charge a 0.15% annual platform fee (capped at £375 which is a pot worth over £250k) on top of the fund fee. You can currently buy the same funds cheaper on other investing platforms such as Trading 212 as they have NO platform fees.
See the below table to understand how a 0.15% fee change can affect your end balance (does not include any fee caps, purely for reference).
The Affect of Platform Fees over a 30 Year Investing Period
Platform Fee |
Monthly Deposit |
After 30 Years Invested |
Paid in Fees |
Total Saved |
|---|---|---|---|---|
0.15%
|
£200
|
£219,709
|
£15,499
|
-
|
0%
|
£200
|
£225,855
|
£9,353
|
£6,146
|
0.15%
|
£500
|
£549,272
|
£38,748
|
-
|
0%
|
£500
|
£564,637
|
£23,384
|
£15,364
|
Figures above are assuming an average of 7% returns, investing in the same funds with a fund fee of 0.22% and a starting balance of £0. They are also assuming there is no cap on the platform fee.
Reputation
The last thing I want to briefly touch on is reputation. Like all good companies the ones with the best reputation stick around the longest.
In the financial sector many of the major players however can be very expensive on fees and newer platforms have offered substantial competition whilst offering a similar if not better service at lower cost to the customer.
Obviously there is peace of mind to be gained through investing with a business with a long lasting pedigree, just make sure the name isn’t all you’re paying extra for.
My two cents
I currently use Trading 212 for my investing due to them being the cheapest way for me to invest in ETFs. I started with using Vanguards own website however found their funds to be cheaper hold through Trading 212 (no platform fee) so I transferred everything recently.
Obviously its not all about fees though. I have found Trading 212 to be more focussed towards short term buying and selling of individual shares. This means it can be difficult to track long term performance with it only showing a simple percentage return from what you have invested not a rate of return.
Although the above is a negative I can still invest in the funds I want and it’s cheaper which is a big win in the long term.
Do your own research
Now its over to you to research for yourself and find the option which suits you. This link is to Money Saving Expert which shows the current best options for Stocks and Shares ISA Platforms and includes their fees.
I would look at the ‘DIY Stocks & Shares ISA Platform’ table rather than the ‘Managed and Robo investor platform’. Often Robo investors charge a higher fee just to put your money in a standard ETF fund which you could just as easily select by yourself.
Conclusion
As with many things in life shopping around is the best way to make the most of your money.
Obviously there is more to life than trying to get as low a fee as possible but optimising this can pay benefits in the long run.
Thankfully with the current flexibility of the ISA system there’s never been a better time to try out a different platform. As a reminder please ensure you don’t go over your £20,000 yearly deposit limit across all your ISAs.
There you have it a simple guide to the things that matter most when choosing your perfect investment platform. Happy investing!
Disclaimer
All information is not financial advice and is purely meant for educational purposes only. Investing involves the risk of loss of capital as well as its gain. Any investments mentioned on this website are meant as examples not specific recommendations. Always do your own research and/or gain the help of a financial advisor.
